Argentina and Brazil postpone free trade of 10-year-old cars

As he could tell Field of application -If the Brazilian government does not make any last-minute changes, as agreed until yesterday, the agreement would be extended by 10 years, the trade coefficient between the two countries will increase gradually every two years. and it would be advantageous for companies not to respect the trade balance until 2020. The "forgiveness" that they would receive would prevent them from paying fines.

Specifically, the Flex is modified retroactively, from 1.5 current (for every dollar exported, it can be imported at the price of 1.5 USD without tariff) to 1.7 for the period 2015/2020. In this way, companies that do not respect what is established in terms of exchange, with the new system, will be in order. Between 2020 and 2023, the Flex rises to 1.8 and then every two years, up to 3.

In practice, this means a 10-year free trade postponement, which, if there were no agreement, would begin to take effect next year (this has been the case now since 2030) but would imply now greater commercial openness and especially from next year.

The local terminals were vile for the consequences that could have in the sector that this agreement was not concluded with the current local authorities and had to be negotiated by a possible government of Kirchner, during the period of insults and accusations. . Last August, the newspaper reported pressure from local terminals to speed up negotiations. It should be remembered that 70% of local automotive production goes to Mercosur's main partner. The extension was expected by the sector because, otherwise, free trade would begin to reign from next June, for which Argentina is not prepared.

There is currently a 5 year agreement running until July of next year. It defines trade between the two countries through a coefficient that regulates exports and imports. It's called Flex, and today it says that for every dollar that's exported, it can be imported, duty-free, for $ 1.5. Last June, the first part of this agreement providing for the last year the possibility of revision had expired.

The initial idea was to determine if this coefficient increased to 1.7 until 2020, with a three-year extension of the current system to postpone the entry of free trade, but an agreement to longer term has been concluded. Argentina is less competitive than Brazil and its market is smaller, which would lead, under these conditions, to the migration of motor vehicles and car parts to the neighboring country.

The current uncertainty, badociated with the tensions between Bolsonaro and Fernández, has generated complications and negotiations have been precipitated. Local terminals did not want to arrive next July with a situation without definition because of the future of this agreement depending on production plans and investment for the coming years.. Added to this is the fact that Brazil is proposing a policy of greater trade openness with the threat of leaving Mercosur in case a Kirchner government proposes a more protectionist policy. One fact: Brazil has accepted free trade with Mexico. This is a sign of the direction you are taking.